The project Part 2 AnimalChin is a well-established company. Because of its market share and a fairly stable revenue stream, 1 years ago they successfully issued 25-year maturity 8% bonds, paying semiannually. Today, these bonds are selling for 96% of their face value. The total face value of these bonds is $3.2 billion. The company also issued 9% convertible bonds, paying semiannually, trading at 103% of their face value, maturing in 15 years. The total face value of these bonds is $3 billion. Finally, they just received a $2.5 billion term loan from a bank, the bank is currently charging a 7% interest on the loan. AnimalChin is publicly-traded. Today, its common stock trades for $32 per share. There are .9 billion shares outstanding. Its preferred stock is trading at $19 and just paid a dividend of $1.9. There are .4 billion preferred shares outstanding. The five financial analysts currently covering the company expect AnimalChin to grow at a similar pace as the whole skateboarding sector: about 8%. The last dividend paid on common stock was $3.2 per share. The company’s most recent estimated beta is 1.3. The risk-free rate is 5% and the expected market risk premium 9%. For the Veloce project the company’s CFO has decided to apply an adjustment factor of 2.8% to the company’s WACC to account for additional risk.
1) Calculate Animal Chin’s cost of all debt and the after-tax cost of debt. (Show work)